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Paying Technicians Hourly Or On A Commission Basis

It’s a question that is almost as old as the service business itself….”Do you pay your technicians by the hour, or on a commission basis?”
And, as long as the question has been around, there have been people who are adamant about each payment method. On one side, there are those who believe that technicians should never be compensated on any system other than an hourly wage because anything that includes an incentive, bonus or commission will result in customers paying for things they don’t need or want.

On the other side, there’s the group that believes only in a performance-based pay system for technicians because the quality of the work they do is directly related to how they are compensated, and the end result of earning commissions and bonuses is an improvement in both customer service and company profitability.

And, those who express their strong beliefs about being in one camp or another on this subject are often of the opinion that when you consider the issue from the perspective of service management, you have to embrace one philosophy or the other; that there’s no middle ground. Well, like most everything else we do when we’re a leader dealing with people, there are other ways to look at this issue when we factor in human nature.

What I mean by that is that it’s part of the human condition to want to do the best job we can do.

Let’s face it. We are all, from a fundamental perspective, goal-seeking mechanisms. Once we have spent time focusing on mastering a task or achieving a goal that when we first set it was intimidating to say the least, it doesn’t take long for us to begin thinking about what we can do next. And, part of the reason this is true is that when people are just being people, we desire, and enjoy, reaping two types of benefits from accomplishing things and achieving at a high performance level. These two types of benefits are known as intrinsic (that’s on the inside…knowing that we’ve done a good job) and extrinsic (stuff we can purchase, have, see, watch our family enjoy, hold in our hand, or use as we pursue a hobby or recreational activity).

Of course, if one’s hourly wage, accompanying benefits, and working conditions are very sufficient and consistently increasing in accordance with rising living costs in order to ensure that an employee could easily and comfortably pay their basic bills for housing, utilities, groceries, etc…and also have whatever that person considers a sufficient amount left over for recreational activities, then it’s possible that those inherent human needs mentioned above will be met.

And, it’s also true that some jobs are a just a proper fit for an hourly wage, while others are a proper fit for an incentive-based payment system.

However, as you can probably guess by now, I’m of the opinion that hourly and hourly alone is not the best compensation system for a technical professional, a person whose responsibilities include not only troubleshooting HVACR equipment  and replacing parts, but also providing front-line customer service from the perspective of the autonomy that this kind of work both affords and requires.

When a competent, journeyman level technician is in a customer’s home or business, they are essentially “on their own” and “independent”. And, when they’re good at what they do, that’s just the way they like it. If this wasn’t true, then they wouldn’t have been drawn this type of career in the first place.

Sure, they enjoy working with their hands, but they also want to work with people, and they want the challenge of solving their customer’s technical problem, not just because it means that the equipment is working again, but because they know that when they’re working at their craft, they’re also providing peace of mind, convenience, and comfort for their customers. And, as a service manager, it’s our job to support them in accomplishing their mission so they can experience those intrinsic and extrinsic benefits.

Are there horror stories out there about service companies that pay (or paid because they’re not around anymore) technicians on a commission basis? Of course there are.

And one thing you can bet the farm on about these businesses is that when they have (or had) their weekly employee meetings, the service….actually, sales…. manager stomped around the room, getting in people’s faces, demanding to know “How many service contracts did you sell this week?” Or, “How many extra contactors, condenser fan motors, start capacitors or relays did you sell while you were replacing the first part that failed?” Or, “What was your add-on sales total this week?”

And part-and-parcel of this type of business environment is that if a technician’s response is that in some situations, the customer simply did not want or flat-out did not have the resources to purchase a service contract, or there were parts that they determined didn’t need replacing, the manager’s job is to hold up another technician’s numbers as an example to prove that extra revenue is always available if it’s done right.

This is not a customer service environment. It’s a revenue generating environment.

And, the fact of the matter is, a technical professional who is pursuing their mission as described above is not going to stay in this type of environment, which leaves only those technicians who are willing to go along with the revenue-and-revenue-only philosophy of doing business, which no matter how you slice it, is simply dishonesty.

No doubt, dishonesty is an issue in any business. HVACR companies that have been around for generations pride themselves on their integrity and they work hard to maintain their reputation. And when it comes to dishonesty and understanding more about it, there are books on the subject.

Here’s one example:—Especially/dp/B00J5TXATA/ref=sr_1_fkmr0_2?ie=UTF8&qid=1441382470&sr=8-2-fkmr0&keywords=%28Honest%29+Truth+About+Dishonesty%3A+How+We+Lie+to+Everyone+%E2%80%94+Especially+Ourselves%2C+by+Dan+Ariely

In this book, the author discusses the idea that people can be dishonest about anything and everything, and they can make the decision on whether or not to be honest based on an SMORC (Simple Model of Rational Crime). One example of this would be a person who is short on cash, notices a liquor store, and then does a cost-benefit calculation in regard to the risk of getting caught, which leads them to a decision to either go ahead and rob the store, or not.

I have no argument with this logic. It’s simply realistic to understand that any person could, in a particular situation supported by certain factors, along with stress, desperation, etc…could convince themselves to commit a crime. And it’s also realistic to accept that in addition to being capable of committing a violent crime, a given environment in a service company could also prompt some individuals to justify extra parts or services that may or may not be necessary.

How would you know if a particular service company could be subject to actions that might be considered dishonest?

Ask the employees this question: “What is the mission of your company?”

If the answer is “to make money” or “pay expenses and show a profit”, you have your answer. It would be possible for a technician working in an environment where commissions or spiffs are paid to ‘push’ for additional revenue.

However, if the answer you get is a clear, concise mission statement that, in as few words as possible (so that it is easily learned, remembered and recited by everyone in your company) states your mission, which is focused on customer service with integrity and honesty, then you have established the basis for an environment in which you can, with consistent management on your part, ensure that your customers will benefit from the best service possible.

In establishing this environment, you would be providing technicians an opportunity to take ownership of the service calls they perform from the perspective of doing the best job possible for the customer, which would include being aware of additional items and/or services that the customer could benefit from, and, while understanding that “sell” is not a four-letter word, let the customer know about these items/services so they can make an informed buying decision. And taking this approach to establishing a performance-based pay system for your technicians would benefit everyone involved.

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